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Sunday, August 21, 2016

How Beverly Hills Billionaires Built A Water Empire In California With Taxpayer Money

Beverly Hills Billionaires Stewart and Lynda Resnick control an agricultural empire in the Central Valley of California which Forbes values at $4.2BN. According to an article recently published byMother Jones, the Beverly Hills based couple bought their first acres of ag land in 1978 as an inflation hedge. Within 20 years the Resnicks had grown to be the largest producer/packager of almonds and pistachios in the world with 130,000 acres of land in the Central Valley and nearly $5BN in annual sales. You're all probably familiar with some of their brands:

But 130,000 acres of permanent crops requires a lot of water...about 120 billion gallons a year, in fact. At that level of consumption, Mother Jones points out that the Resnicks consume more water than all the homes in Los Angeles combined.

So in a state plagued by constant drought one might ask how the Resnicks built such a "thirsty" empire? Well, at lease according to Mother Jones, they got a lot of help from taxpayers.

The Resnicks received their first taxpayer-funded water windfall in 1995 when they were effectively "gifted" the Kern Water Bank by the State of California (i.e. taxpayers). Ironically, the State had just purchased the Kern Water Bank 7 years prior for $148mm (in current terms) to serve as an emergency water supply for Los Angeles. We guess the threats that had led the State to seek out an emergency supply of water disappeared over the course of those 7 years.

As you might suspect, California taxpayers have always been a little suspect of the massive wealth transfer inherent in the Kern Water Bank deal. As pointed out by the Los Angeles Times,the Kern Water Bank transfer has been the subject of decades of litigation with local water agencies and environmental groups that say "the Kern Water Bank transaction was essentially a gift of public property to private interests and therefore violates the state constitution."

"By giving this resource away, not only have we lost money on the deal, but we've lost a mechanism to use this water for the most beneficial purposes," Adam Keats of the Tucson-based Center for Biological Diversity, the lead attorney on the lawsuit, told me recently.

The storage facility is the Kern Water Bank, a complex of wells, pumps and pipelines on a 20,000-acre parcel of abandoned farmland southwest of Bakersfield. The water bank was initially part of the $1.75-billion bond-funded State Water Project, which provides water for 25 million Californians and irrigates 750,000 acres.